Techniques
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To answer the question below, I was instructed to utilize one or more of the following techniques:
-Confidence intervals and hypothesis testing
-Decision trees (and their use in solving managerial problems),
-Critical fractile analysis (and its use in determining optimal demand levels),
-Analysis of variance/ANOVA (and its use in understanding differences between group means),
-Chi-square (cross tabs/contingency table) analysis (and its use in determining differences between group proportions),
-Regression, single and multiple (and its use in understanding relationships between dependent and independent (explanatory) variables), and
-Optimization modeling (and its use in determining the best solution given a set of constraint).
Question:
You are a brand manager and have been running TV ads to market your product. However, you are considering running a series of spots that specifically targets wealthy consumers. The spots will cost $2K out of your $100K advertising budget. You estimate the market potential for wealthy consumers to be $250K. You hire a marketing research firm to conduct a survey that will help you determine if wealthy consumers will respond more favorably to the spots targeted towards them than the general spots. The researcher suggests you "use an alpha level = .05."
a. Explain in managerial terms what is meant by "use an alpha level = .05." Do you agree with her suggestion? If so, explain why. If not, explain why and indicate the alpha level you would use instead.
b.After conducting the research, the researcher reports that wealthy consumers did in fact respond more favorably to the spots targeted towards them than the general spots (p = .12). Explain in managerial terms what is meant by p = .12. Given your answer to question 1a, what managerial action would you undertake?
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Solution Summary
The solution discusses how to properly answer the question below, using one or more of the following techniques:
-Confidence intervals and hypothesis testing
-Decision trees (and their use in solving managerial problems),
-Critical fractile analysis (and its use in determining optimal demand levels),
-Analysis of variance/ANOVA (and its use in understanding differences between group means),
-Chi-square (cross tabs/contingency table) analysis (and its use in determining differences between group proportions),
-Regression, single and multiple (and its use in understanding relationships between dependent and independent (explanatory) variables), and
-Optimization modeling (and its use in determining the best solution given a set of constraint).
Question:
You are a brand manager and have been running TV ads to market your product. However, you are considering running a series of spots that specifically targets wealthy consumers. The spots will cost $2K out of your $100K advertising budget. You estimate the market potential for wealthy consumers to be $250K. You hire a marketing research firm to conduct a survey that will help you determine if wealthy consumers will respond more favorably to the spots targeted towards them than the general spots. The researcher suggests you "use an alpha level = .05."
a. Explain in managerial terms what is meant by "use an alpha level = .05." Do you agree with her suggestion? If so, explain why. If not, explain why and indicate the alpha level you would use instead.
b.After conducting the research, the researcher reports that wealthy consumers did in fact respond more favorably to the spots targeted towards them than the general spots (p = .12). Explain in managerial terms what is meant by p = .12. Given your answer to question 1a, what managerial action would you undertake?
Solution Preview
A)
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<br>Null hypothesis - advertising money played no effect on the increase of the rich client viewing the ad
<br>Alternative hypothesis - advertising does play a role in the increase of the rich client viewing the ad.
<br>when you do a test in statistics, the main goal is to verify that the effect occurred because of the independent variable, and not purely by chance.
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<br>In this case, you want to find out that the advertising budget was the main cause of the wealthy clients looking at the targeted ad, and this effect was seen not because of chance.
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<br>The alpha level is basically the measure of how much chance are you allowing in the statistics.
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<br>For example, if you alpha ...
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